AMC Repo Clearing sees trades of over Rs 10,000 crore in February

Fee waiver, more participation and increased order size result in surge

AMC Repo Clearing (ARCL), a limited purpose clearing corporation aimed at boosting liquidity in the corporate bond and debt market, recorded volumes of over Rs 10,000 crore in February, a four-fold jump on a month on month basis.

Launched by Finance Minister Nirmala Sitharaman in July 2023, ARCL clocked a turnover of Rs 10,524 crore from 122 trades, up from Rs 2,432 crore from 46 trades in January. The initial four months remained tepid for the clearing body with August registering zero trades while July recording trades only on the launch day for Rs 480 crore.

Last month, the participation from mutual funds (MFs) and primary dealers surged while that of banks declined. Almost half of the volumes were generated by MFs, while primary dealers contributed 45 per cent to the turnover. Merchant bankers and banks contributed one per cent each while trades from non-banking financial companies (NBFCs) came at around 3.11 per cent of the volumes.

Waiving of transaction charges (for three months) and an increase in the minimum order size from Rs 50 crore to Rs 200 crore gave a fillip to the volumes. 

“Trading members generally charge brokerage at order level which is capped to a certain amount. An increase in the minimum order size from Rs 50 crore to Rs 200 crore has helped in reducing brokerage cost (in terms of basis point) for the market participants,” said an official.

“ARCL allows participants to borrow additionally against AAA-rated bonds issued by PSUs, financial institutions and banks. This has increased the overall borrowing limit for market participants,” he added.

The settlement and clearing provider for the tri-party repo, backed by the Securities and Exchange Board of India (Sebi) and funded by asset management companies (AMCs), became operational after two years of its incorporation.

ARCL offers clearing and settlement services to all trades executed on the NSE and the BSE under tri-party repo in corporate debt securities with risk management and a guarantee mechanism. As of January 31, the core settlement guarantee fund stood at Rs 136 crore.

The platform is also used by market makers and short-term traders to take a position and manage their risks in listed corporate bonds and debentures (Non-Convertible Debt securities), commercial papers (CPs) and certificate of deposits (CDs).